Is China Exporting Its Environmental Problems?

One of the best pieces of news in years is that China's finally getting serious about cleaning up its environment. Renewable energy use is growing rapidly while coal use is declining. Air pollution targets are being tightened. Contaminated farmland is finally getting high-level attention. Yet all that good could be undermined if China simply exports its environmental problems elsewhere.

A case in point is China's campaign to protect its forests. For years, logging ran rampant as the country transformed itself into the world’s biggest buyer of timber and wood products, including everything from furniture to paper. Denudedhillsides contributed to massive floods in 1998 that forced millions to evacuate their homes. Fortunately, according to a study published last week in Science, stricter enforcement of localized logging bans has reversed the trend: Between 2000 and 2010, tree cover increased over 1.6 percent of Chinese territory (and declined over .38 percent). This year, China plans to cut its commercial logging quota another 6.8 percent and will expand a ban on logging natural forests nationwide.

Here's the problem, though: As China has quieted its chainsaws, the country has become the world’s largest importer of timber; the government predicts that by 2020 it will rely on imports for 40 percent of its needs. And as buyers, Chinese companies aren't terribly discerning. According to the London-based think tank Chatham House, China’s purchases of illegally harvested timber nearly doubled between 2000 and 2013, growing to more than 1.1 billion cubic feet.

The damage extends across the developing world. China buys up 90 percent of Mozambique's timber exports, around half of which were harvested at rates too fast to sustain the forest over the long-term. In 2013, the World Wildlife Fund declared that illegal logging in the Russian Far East had reached “crisis proportions” after finding that oak was being logged for export to China at more than twice the authorized volumes. That same year, Myanmar tripled the volume of endangered rosewood exported to China (where it's particularly valued for its use in furniture). At those rates, some of Myanmar’s rosewood species could be extinct by 2017. Despite a total ban enacted in 2014, rosewood exports to China surged last year to levels reportedly not seen in a decade.

China has no law against importing timber that was harvested illegally; buyers and overseas Chinese loggers (they can range from small independents to large corporations) are meant to self-regulate. (By contrast, the U.S. has had a formal ban on illegal plant imports since 2008.) Indeed, when Myanmar sentenced 153 Chinese loggers for illegal logging within its borders last year, China protested vociferously. The loggers were eventually freed.

Contributing to deforestation elsewhere obviously weakens the impact of China's own reforestation efforts. It threatens the supply of timber. And it exposes Chinese companies to reputational risk and even boycotts. Last year, Virginia-based Lumber Liquidators agreed to pay $13.2 million to settle charges that it had imported flooring from China that had been illegally logged in Myanmar and the Russian Far East. Though the Chinese supplier (the Suifenhe Xingjia Group) hasn’t been prosecuted in China, its alleged connection to Russian organized crime has to give pause to potential customers.

China established a national timber tracking and inspection system last year that's meant to give buyers more certainty about the sources of their imports. But the system is voluntary, limited in scope and easily manipulated. Companies face no legal sanction if they falsify the information.

At a minimum, China needs to ban formally the import of illegal timber. That should encourage better compliance with the existing tracking system. A similar system has worked in the U.S., where illegal imports of forested wood have declined between 32 percent and 44 percent since 2008.

China should also strive to respect export controls placed on wood by their trading partners, especially in developing Southeast Asia and Africa, by vigorously supporting prosecutions of individuals and companies that violate them. At the same time, U.S. and EU companies should conduct independent audits of their suppliers to ensure that imports meet their own domestic legal requirements.

Softening the impact of China’s economy on the global environment will never be easy. But if China can operate abroad as it expects its companies to do at home, it’ll be doing the planet a world of good.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.